Nominal GDP measures the value of all final goods and services at base-year prices.
The unemployment rate is higher with a minimum wage law than it would be without a
minimum wage law.
In the circular flow diagram, the value of all the income in the economy is greater than
the value of goods and services produced in the economy.
A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good
at a total cost of $50,000. If the prevailing market price is $48, the number of firms and
the industry’s output will decrease in the long run.
In a free market there are significant restrictions on how a good or service can be
produced or sold.
If net exports are positive for China, it must be true that China is experiencing net
outflows of capital.
An increase in government spending increases the supply of money in our economy.
If a firm experiences diminishing returns its marginal product must be negative.
Charging different prices to different consumers for the same product when the price
differences are not due to differences in cost is called arbitrage.
In the 1960s, many economists and policymakers believed the trade-off between
inflation and unemployment was permanent.
Which of the following would cause an increase in the supply of cheese?
A) a decrease in the price of wine (assuming that cheese and wine are complements)
B) an increase in the price of cheese
C) an increase the price of a product that producers sell instead of cheese
D) an increase in the number of firms that produce cheese
Which of the following is “crowded out” by higher interest rates that can be the result of
expansionary fiscal policy?
A) consumption
B) private investment
C) net exports
D) All of the above are crowded out by higher interest rates.
Which of the following would be directly counted in GDP in 2014?
A) kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built
in 1997
B) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a
brand new country-style home
C) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm
house built in 1950
D) none of the above
Figure 14-2
The
government of a developing country plans to award two firms, Gigacom and
Xenophone, the exclusive rights to share the market for high speed Internet service.
Gigacom and Xenophone can both provide the service either via television cable lines
or via direct subscriber line (dbl). Suppose the government is considering a proposal to
delay one firm’s entry into the market on the grounds that it wants to prevent “harmful”
competition. Figure 14-2 shows the decision tree for this game.How will Rainbow
Writer respond to Odeon’s two possible offers?
A) Rainbow Writer will reject either offer.
B) Rainbow Writer will only accept an offer of $30 per copy of the software package.
C) Rainbow Writer will only accept an offer of $40 per copy of the software package.
D) Rainbow Writer will accept either offer.
Figure 16-5
Suppose the firm represented in the diagram decides to practice perfect price
discrimination. What is the profit-maximizing price it will charge?
A) It should charge a range of prices from $40 to $16.
B) It should charge a range of prices from $40 to $12.
C) $2
D) $8
How does an increase in the relative price of a country’s goods in terms of foreign
goods, or real exchange rate, affect its balance of trade?
A) An increase in the real exchange rate raises imports, reduces exports, and reduces
the balance of trade.
B) An increase in the real exchange rate reduces imports, raises exports, and reduces the
balance of trade.
C) An increase in the real exchange rate reduces imports, raises exports, and increases
the balance of trade.
D) An increase in the real exchange rate raises imports, reduces exports, and increases
the balance of trade.
Letters are used to represent the terms used to answer this question: price (P), quantity
of output (Q), total cost (TC) and average total cost (ATC). Which of the following
equations is equal to a firm’s profit?
A) P – ATC
B) (P Q) – TC
C) (P Q) – (P ATC)
D) P – TC
Figure 12-5
Figure 12-5 shows cost and demand
curves facing a typical firm in a constant-cost, perfectly competitive industry. If the
market price is $20, what is the average profit at the profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
Figure 9-2
Suppose the U.S. government
imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this
tariff. The loss in domestic consumer surplus as a result of the tariff is equal to the area
A) B + D + E + F.
B) D + E + F.
C) C + D + E + F.
D) B.
Figure 16-6 Watanabe Sensei
operates the only martial arts school in Hartfield. For simplicity, assume that consumers
have identical demand curves and that Sensei knows what this demand curve is. Figure
16-6 shows this demand curve.
Sensei’s friend, Marcel, suggests that he charge a one-time membership fee to use the
martial arts school, in addition to a per-class charge. Suppose Sensei charges the
monopoly price for each class and also imposes a one-time membership fee. What is the
maximum amount of revenue from the membership fee he can collect from all his
customers?
A) an amount equal to the area A + B
B) an amount equal to the area E + F
C) an amount equal to the area H + G
D) an amount equal to the area A + C + H
If the price of pork rinds falls, the substitution effect due to the price change will cause
A) an increase in the demand for pork rinds.
B) an increase in the demand for corn chips, a substitute for pork rinds.
C) an increase in the quantity of pork rinds demanded.
D) a decrease in the quantity of pork rinds demanded.
Which of the following statements is true about advertising by a monopolistically
competitive firm?
A) Since the monopolistic competitor, like the perfect competitor, makes zero profit in
the long run, it is a waste of resources to advertise its products.
B) Advertising could make the monopolistic competitor’s demand more inelastic, but
advertising has no effect on a perfect competitor’s demand.
C) Advertising will be more beneficial if a monopolistic competitor colludes with other
firms to advertise the products of the industry as a whole rather than an individual firm’s
product.
D) Monopolistically competitive firms tend to shun advertising because advertising
draws attention to the variety of differentiated products available in the industry.
Why is the real-world deposit multiplier smaller than 1/RR, where RR is the required
reserve ratio?
If the value added of a firm is positive, will the firm necessarily have positive profits?
In 1984, the National Minimum Drinking Age Act was passed, raising the legal age to
consume alcoholic beverages in the United States to 21. In much of Europe, the legal
age to consume alcohol is 18. If the legal drinking age in the United States was changed
back to 18, how would this affect the market for alcoholic beverages? What would
happen to the equilibrium price and quantity of alcoholic beverages?
How would you expect the Fed to respond to a negative supply shock in the economy?
In the term “real GDP,” what does “GDP” stand for and what does it measure? What
does “real” indicate?
What is the relationship among the current account, the financial account, and the
balance of payments?
Explain whether it is possible for a country to have an absolute advantage in the
production of a product without having a comparative advantage in the production of
that product.
Explain the difference between a cooperative equilibrium and a noncooperative
equilibrium in game theory.